Business Groups, Governance,
Institutional Frameworks and Cultures:
Indian Mergers and Acquisitions
A thesis submitted in fulfilment of the requirements
for the degree of Doctor of Philosophy
Vineet Tawani
M. Com, M. Finance
(RMIT University, Melbourne)
School of Economics, Finance and Marketing
College of Business
RMIT University
April 2017
ii
Declaration
I certify that except where due acknowledgement has been made, the work is that of
the author alone; the work has not been submitted previously, in whole or in part, to qualify
for any other academic award; the content of the thesis is the result of work which has been
carried out since the official commencement date of the approved research program; and, any
editorial work, paid or unpaid, carried out by a third party is acknowledged; and, ethics
procedures and guidelines have been followed.
I acknowledge the support I have received for my research through the provision of
an Australian Government Research Training Program Scholarship.
Vineet Tawani
20th July 2017
iii
Acknowledgements
Every accomplishment in our lives is great. However, it is the contribution of the
people involved in each accomplishment which is even greater. Here, I acknowldedge the
contributions of all those who have participated in this journey, playing varied but critical
roles.
First and foremost, I would like to thank my supervisors, Prof. Sinclair Davidson and
Dr Stuart Thomas whose role as guide throughout this journey is superior to all. Thinking of
them, a distinguished couplet from one of the most revered 15th century Indian poets is quite
apt:
“Both are present but whom should I pay my respect first – my Guru or my Deity?
It must be my Guru for having illuminated my intellects to realize the Almighty.”
Kabir (translated in English)
Without Prof. Davidson’s unflinching faith, relentless positivity and constant
motivation, I would not be writing my acknowledgement today. His astute inputs and cheerful
demeanor made the journey seem comfortable. Words will never sufficiently express my
deepest gratitude for his unconditional support. I thank Dr Thomas for his time and energy,
and for his help and guidance in achieving major milestones throughout the journey. His
prompt and insightful feedback was imperative in finalizing my thesis.
Next, I am very thankful to God for giving me the opportunity to undertake the
prestigious and rewarding qualification of a PhD, and for blessing me with both the intellect
and the spirit to overcome challenges and evolve throughout the process. I am certain that not
everyone is lucky enough to have such an opportunity. I am also thankful to Him for sending
so many well-wishers my way. I am truly blessed to have a very supportive group of people
around me. And today, I wish to thank all of them.
The first person I wish to thank is my wife, Supriya. Her scarifices are superior to all.
My PhD entered its intensive mode during the first year of our marriage and Supriya had to
sacrifice the joys of newly-wed bliss. Throughout this entire journey, she shouldered the
family responsibilities and always stood strong and steadfast beside me. Her sacrifices,
encouragement and patience are unquestionably the foundations upon which this thesis is
built. I am in awe of your strength, Supriya. Thank you so much for being such a strong pillar
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of support and a wonderful wife. I assure you that I shall now endeavour to make up for all
our lost time together.
I would also like to thank my parents, my siblings and my extended family, including
Supriya’s parents and her siblings. I am blesssed to have lovely families, in which everyone
showers blessings, encouragement and is willing to endure all pains to see that everyone
progresses. As the PhD journey is rarely smooth, their kind words and gestures uplifted my
spirits and contributed significantly in their own way.
Further, I would like to thank my friends and colleagues Nirav, Guillermo, Vivek and
Parul for their affection, support, guidance and help. They have always expressed an interest
in my work, and ensuing discussions with them were fruitful in streamlining my ideas about
my reserach.
Next, I would like to mention Kazuhiro and Jasper at Thomson Reuters for their help
in organizing my data for the thesis. This thesis is based on Thomson Reuters’ Databases,
which are fairly sophisticated and can be overwhelming for beginners. Kazuhiro and Jasper
were instrumental in explaining the functions and the critical aspects of these databases.
I would also like to extend my gratitude to Sally at http://wordly.com.au/ for her
promptness, meticulousness and professionalism while editing this thesis.
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Table of Contents
Declaration ................................................................................................................................................. ii
Acknowledgements ................................................................................................................................... iii
Table of Contents ....................................................................................................................................... v
List of Figures ........................................................................................................................................... ix
List of Tables ............................................................................................................................................. xi
Abstract ...................................................................................................................................................... 1
Introduction
1.1 Motivation ...................................................................................................................................... 1-5
1.2 Research Contribution .................................................................................................................. 1-8
1.2.1 Contextual Contribution 1-8
1.2.2 Methodological Contribution 1-14
1.3 Thesis Outline ............................................................................................................................... 1-15
Literature and Hypotheses
2.1 Introduction.................................................................................................................................. 2-16
2.2 Origin, Motives and Incentives for M&As ................................................................................ 2-16
2.3 Do M&As Have Synergies? ......................................................................................................... 2-21
2.3.1 Returns to Target or Selling Firms’ Shareholders 2-21
2.3.2 Returns to Acquirer or Buying Firms Shareholders 2-22
2.4 Factors Affecting Takeover Premiums ...................................................................................... 2-23
2.4.1 Emerging Market Effects – Indian Business Houses 2-23
2.4.2 Information Asymmetry – Relatedness Effect 2-29
2.4.3 Cross-Border M&As – Multidimensional Effects 2-34
2.4.4 Methods of Payment – Consideration Effect 2-60
2.4.5 Industry – Diversification Effect 2-61
2.5 Overall Summary ......................................................................................................................... 2-61
Methodology
3.1 Introduction.................................................................................................................................. 3-63
3.2 Fundamentals ............................................................................................................................... 3-64
3.2.1 Event Study Assumptions 3-64
3.2.2 Event and Event Date 3-66
3.2.3 Estimation and Event Period Windows 3-67
3.2.4 Choice of Models 3-68
3.2.5 Choice of Index 3-70
3.2.6 Data Frequency 3-70
3.2.7 Sample Size 3-71
3.2.8 Non-Synchronous Trading 3-71
3.2.9 Non-Normality of Daily Data 3-71
3.2.10 Hetroskedasticity – Event Induced Variance 3-72
3.2.11 Event Clustering - Cross-Sectional Dependence 3-73
3.2.12 Cross-Sectional Correlation of Estimated Abnormal Returns 3-74
3.2.13 Autocorrelation 3-74
3.2.14 Impact of Outliers and Leveraged Data-Points 3-74
